Work

The impact of the US-China tensions on FDI dynamics in emerging economies

Year: 2025

Type: article

Abstract: • We investigate the role of the US-China tensions in FDI. • We use panel data from 1993 to 2022 in 14 emerging economies. • We employ the PMG-ARDL model. • Higher economic growth and REER increase FDI. • The US-China tensions deter FDI inflows. Utilising panel data of 14 emerging economies from 1993 to 2022, we employ the Pooled Mean Group-Panel Autoregressive Distributed Lag (PMG-ARDL) model to analyse the effects of economic growth, regulatory quality, exchange rate stability, and geopolitical risks alongside the US-China Tension index on foreign direct investment (FDI) inflows. We find that robust economic growth and stable exchange rate increase FDI. Along with geopolitical risks and regulatory quality, the US-China Tensions deter FDI. These findings highlight firms' shifting investment patterns in emerging markets under risks.

Source: Finance research letters

DOI: 10.1016/j.frl.2025.107255

Authors: Ling Liu, Giray Gozgor, Mantu Kumar Mahalik, Shreya Pal

Institutions: Guangzhou University, University of Bradford, City University of Macau, Indian Institute of Technology Kharagpur, Indian Institute of Plantation Management

Language: English

Topic: International Business and FDI

Subfield: Strategy and Management

Field: Business, Management and Accounting

Domain: Social Sciences

SDGs: Decent work and economic growth, Industry, innovation and infrastructure

Open Access status: hybrid

Estimated APC paid: $3,730